A U.S. District Court has dismissed a lawsuit brought against digital currency transaction processing firm Riot Blockchain. Riot had been accused by a group of investors of having engaged in a multi-million dollar pump and dump scheme.
In their lawsuit, the plaintiffs claimed that Riot Blockchain, led by the then-CEO John O’Rourke, issued materially false and misleading statements in Riot’s securities registration statements. This played a big role in inflating the price of the company’s stock, they claimed. They also claimed that O’Rourke and other named defendants conducted a scheme that led to the plaintiffs purchasing the Riot stock at artificially inflated prices.
In her ruling, Judge Freda Wolfson of the New Jersey District Court stated that the statements in Riot’s registration documents which the plaintiffs were challenging “are not false or misleading.” She stated that the challenged statements either constituted “inactionable puffery or are not adequately alleged to have been false or misleading when made.”
The Judge found that the facts which Riot omitted couldn’t have been seen to significantly alter the “total mix of information made available.” These were merely statements of optimism or hope and are incapable of duping the market.
She concluded, “In sum, I find that Plaintiff has failed to adequately allege that any of the statements identified by Plaintiff in Riot’s registration statements, proxy statements, or press releases and similar public statements were materially false or misleading.”
While the Judge exonerated Riot, she found that one of its shareholders, Barry Honig, had committed deceptive and manipulative actions that had duped the plaintiffs into investing in Riot. Honig was one of the largest investors in Riot, at one point owning over 11% of the company. However, he sold most of his shares without disclosing to the market.
The plaintiffs first filed the lawsuit against Riot in February 2018. Led by lead plaintiff Stanley Golovac, the investors claimed that the company had engaged in a massive pump and dump scheme. The SEC also accused the company of a similar crime, eventually leading to the dismissal of the CEO John O’Rourke. He went on to settle his case with the SEC, paying $1.15 million in fines.
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